Twitter's stock opened at just above $50 a share on Thursday, a drop of more than 23% and its lowest trading price in nearly two months. That drop effectively shaved off more than $8 billion from Twitter's market cap overnight.

The sharp decline followed Twitter's fourth quarter earnings report on Wednesday afternoon, its first as a public company. Twitter came in well ahead of Wall Street estimates for revenue, but user growth was much slower than expected and engagement actually declined quarter-over-quarter.

Twitter reported having 241 million monthly active users at the end of the December quarter, a gain of just 9 million. In the United States, Twitter had 54 million monthly active users, a gain of just 1 million. Engagement, as measured by timeline views, declined from 159 billion in the third quarter to 148 billion in the fourth quarter.

Twitter's stock had skyrocketed since the company went public in November, at one point nearly tripling from its IPO price of $26 a share. Following the earnings report, however, multiple analysts downgraded the stock.

"Expectations were higher for Twitter," says Arvind Bhatia, an analyst with Sterne Agee, who lowered his rating for the stock from neutral to underperform. "User growth and engagement are going to be the key metrics [going forward] because we all know that impacts how people think about the longterm on this company."

The concern, according to Bhatia and others, is that the growth and engagement numbers suggest Twitter may not be able to achieve mainstream adoption and the advertising revenue that comes with it.

"A lack of mainstream adoption or a more simplified use case was a worry of ours coming out of the IPO and seems to have come to the fore faster than we had anticipated," Eric Sherdian, an analyst with UBS, wrote in an investor note, downgrading Twitter stock to sell from neutral.

Dick Costolo, Twitter's CEO, attempted to defuse these concerns by emphasizing continued efforts to make the social network simpler for new users and explaining that some decline in engagement could be attributed to product changes like threaded conversations.

Judging by the stock price, Wall Street doesn't seem to be buying that explanation.

"Unless they give us historical numbers and perspective," Bhatia says, "it's hard to just look at that and say, 'It's ok, I don't need to worry about it.'"

He added: "Most people came out scratching their heads saying, 'If at this early stage they're not getting the eyeballs, what are advertisers going to say when they see there's no growth?"

Not everyone was concerned about whether Twitter was destined to be a more niche service than competitors like Facebook; some analysts have assumed as much all along.

"[M]ost of the investment community will focus on user and usage-related metrics," Brian Wieser, a senior research analyst with Pivotal Research, wrote in an investor note."We have always held that Twitter as it stands is a niche medium, but that doesn't mean that it doesn't retain significant value for advertisers at its current scale."

As of publication, the stock had ticked up slightly to $53, but was still down about 20% from the previous closing price. Even at this level, Twitter's stock is still double its IPO price.

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